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New Budget coming with income tax hike

04 May 2022

  • Sabry earmarks tax revenue rise of 15% in two years
  • Calls on everybody to consult conscience and pay up
Finance and Justice Minister M.U.M. Ali Sabry PC said yesterday (4) that a new Budget will be introduced that would include the increase of income-related taxes. “The 2022 Budget, which was passed by Parliament in December 2021, is not realistic anymore. We hope to introduce a new Budget as soon as possible, which would include the increase of income taxes,” said Sabry. Sabry stressed that everybody who is earning should be willing to contribute with the payment of taxes now, as otherwise “it would lead to the fall of society”. “We must all consult our conscience and ask whether we pay income taxes. As lawyers, as doctors, as businessmen, we must all ask whether we are doing our responsibility,” he said. When the Sri Lanka Podujana Peramuna (SLPP)-led ruling alliance came into power in 2019, President Gotabaya Rajapaksa introduced sweeping tax cuts. The Value Added Tax (VAT) was cut from 15% to 8%, while the 2% Nation-Building Tax imposed on businesses, as well as seven other taxes, were abolished. Economists have noted that these tax cuts weakened the country’s fiscal position, which, when coupled with the Covid-19 pandemic, accelerated the economic fallout that Sri Lanka is currently facing. Speaking in the Parliament yesterday, Sabry admitted that “the revenue foregone due to the tax cuts introduced in late 2019, which was estimated to be more than Rs. 500 billion, has resulted in sovereign rating agencies downgrading Sri Lanka to near default levels”. “In my view, these tax cuts should have been gradually reversed in the new environment created by the Covid-19 pandemic. What transpired instead was that the revenue loss led the Central Bank to print money and help the Government to finance the deficit,” he added. Thus, Sabry said that in the next two years, the tax revenue should be increased by at least 15%. “Whoever that comes to this position will have to do it,” he said.


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